After the Chancellor’s Mansion House speech in July, the DWP and regulators published a pack of pension policy papers. These come on top of the Private Member’s Bill paving the way to auto-enrolment enhancements as well as the ongoing challenging journey to turn pension dashboards into a reality.
Aegon has suggested a roadmap to the UK Government which runs till 2030, encompassing not one but likely two future general elections.
Steven Cameron, Pensions Director at Aegon, comments:
“The Government and regulators have gone into overdrive with a highly ambitious and radical pack of pension policy proposals. This covers enhancements to auto-enrolment, a new value for money framework, pension dashboards, wider retirement choices for trust-based scheme members, a solution for small deferred pension pots and extensions to the concept of Collective Defined Contribution schemes. With so many links and inter-dependencies, we need a ‘grand implementation plan’ which in light of the forthcoming general election would hopefully have support across political parties.
“This will include setting priorities, reflecting both a logical sequence but also importantly the size of potential improvements in member outcomes. The DWP’s own analysis1 shows that enhancements to auto-enrolment could improve member outcomes by more than all the other policy initiatives put together, making it a clear front-runner for prioritising.
“We urge Government to concurrently focus on the value for money framework, which is expected to lead to greater, faster scheme consolidation, and pension dashboards. These will both have particularly far-reaching benefits for many millions of members as well as being important building blocks to offering wider retirement choices for trust-based members as well as solutions to small deferred pension pots.
“In contrast, we’d recommend deferring any requirement for trustees to design default retirement income solutions until later in the decade, while any consideration of decumulation only CDC needs to factor in both the many outstanding questions here as well as the time industry will take to consider supplying these.”
Aegon has recommended the following timetable to Government:
| Initiative | Implementation | Rationale |
| Automatic enrolment enhancements | 2025/26 | This will make the greatest difference to member outcomes so should be top priority |
| Trustees to grant access to core pension freedom options – including income drawdown | 2025/26 | Trustees could be encouraged to offer these ahead of legislation on a voluntarily basis |
| Pension dashboards – member access | 2026 | Meeting the indicative date for members to access dashboards should be a priority in its own right and as a building block |
| Value for money framework – default funds | 2026 | It’s important that this is introduced in a robust way to allow like for like comparisons and to reflect the different contexts within which schemes operate |
| Decumulation only CDC available | 2027 | This is highly dependent on the regulatory framework, consumer demand and provider responses |
| Value for money framework – other funds and decumulation | 2027 / 29 | The extension to other funds and decumulation will be complex, requiring tailored consideration based on lessons learnt from VFM for default funds |
| Small pots consolidation | 2028/29 | This should not be implemented until after the first wave of scheme consolidation prompted by the VFM framework and till dashboards are embedded. The ‘clearing house’ could build on dashboard infrastructure. |
| Trustees mandated to offer default retirement income solution | 2029 | There are many challenges in safely designing a decumulation default. |
| VFM framework to be extended to CDC including decumulation only | 2029/30 | CDC with its formulae for setting and managing target benefits raises new questions around what constitutes VFM |
| Trustees to add decumulation only CDC to retirement options | 2030 | These are not currently available and need to have bedded in, with a VFM framework, before trustees should be required to consider offering them, although they might consider earlier on a voluntary basis. |
